Value Element Components and Marketing Strategy of Service

Value Element Components and Marketing Strategy of Service
SUN Xuanzhong, WANG Jing
Business School, China University Of Politics Science and Law, Beijing, 100088, China
Abstract: Nowadays, service plays an important role in the market, and has become a core value
provider. In previous research, description and analysis over service products aren’t in-depth analysis
over value composition and essential relations, so it is difficult to provide strategic guide to service
product in aspect of value marketing. This paper analyzed service product in aspect of value,
summarized major value element components in service product, as well as relations between various
value elements, and summarized systemic strategy of service marketing.
Keywords: Service product, value elements, marketing strategy
1 Research on Service Product
1.1 General definition of service product
Research over service marketing started in 1960s in the West, but there has been no uniform
definition of service. Zeithaml defined service as “services are deeds, performance and effort). [1]
Lehtinen considered service as a kind of or a series of activities to provide consumer with satisfaction
through functions of intermediate persons or machines.
1.2 Definition based on service characteristics
Some scholars defined service from service characteristics. Famous marketing scholar Philip Kotler
defined service as follows, “A service is any act or performance that one party can offer to another that
is essentially intangible and does not result in the ownership of anything. Its production may or may not
be tied to a physical product. ” [2] After a series of research, Gronroos defined service from service
characteristics, “A service is an activity or series of activities of more or less intangible nature that
normally, but not necessarily, take place in interactions between customer and service employees and/or
physical resources or goods and/or systems of service provider, which are provided as solutions to
customer problems.” [3]
1.3 Simple comment on above definitions
Both kinds of definitions above fail to explain internal elements and composition of service product,
so it is difficult for them to analyze and define service product from essence. In our opinion, value is
core connotation and basic composition of service product, and is where vitality of service product lies.
One can recognize service from essence only after in-depth analysis of value elements in service product
and relations among them. Based on such recognition, this paper analyzed value elements of service,
and summarized systemic strategy for service marketing.
2 Major Value Elements of Service
2.1 What is value element of service?
As for service product, customer’s purchase decision is made according to value they perceived in
general. The so called value refers to commodity or service’s ability to meet consumer’s requirements or
beneficiary to consumer. [4]Perceived value is customer’s overall comment on service according to what
the customer obtained and paid, which is a kind of balance between gain and payment. So, service is the
course that enterprise provides such perceived value to customer, and corresponding service course is
also a course, in which customer gains such perceived value. Management strategy of service marketing
is based on research of demands for service values. Through a series of research and thought, we
summarized five value elements of service product, respectively as utility value, experience value,
relation value, knowledge value and brand value. Relations among the five value elements compose
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value system of service product.
2.2 Main value elements in service and the analysis
2.2.1 Utility value
Utility value is the value that could directly meet customer’s requirements. It is the core part of
value system customer gained from service product, and is the basis of all value elements of service
product. To meet customer’s requirement for utility value, enterprise must ensure that it is able to
implement the promised service accurately and reliably. Such kind of ability comes from two aspects,
the first of which are tangible tools; the second is staffs’ ability.
2.2.2 Experience value
Experience value is the value customer perceived in the course of participation. It is the happiness
customer feels. Service enterprise tries to “provide a kind of unforgettable experience through
participation of customer”. [5] Service enterprise must recognize that, experience must be a kind of
feeling that overcomes general experience, it shall be sensation deeply, and pleasant feelings one feels
when his emotion, physical strength, intelligence, or even spirit reaches a certain level.
2.2.3 Knowledge value
Knowledge value is relevant information and technology customer gained from enterprise’s service.
As to customer, knowledge value mainly lies in three aspects: product information, life knowledge and
solution measures.
2.2.4 Relation value
Relation value is the value customer obtained from relations which established and maintained with
service enterprise by customer’s purchase of product. Relationship is a kind of very important resource.
Stable relation could greatly lower transaction cost and information cost. “Another function of service
enterprise is to connect customer and other resources in new modes.” [6] It is where relation value of
service product lies. Relations between enterprise and customer could be divided into five levels: basic
relationship, reactive relationship, accountable relationship, proactive relationship and partnership
relationship. [7] We could conclude that the higher level between enterprise and customer, the larger
relation value customer could gain.
2.2.5 Brand value
Brand value is psychological identification that customer obtained after purchase of branded
service product. Kevin Lane Keller once analyzed value of brand in details, he thought value of brand
lied in: (1) identify origin of product; (2) responsibility appeal of manufacturer; (3) advantageous to
reduce risk; (4) advantageous to reduce search cost; (5) promise, contact and agreement of product
manufacturer; (6) symbolic meaning; (7) quality signal. This analysis is still meaningful to service
industry. Brand value of service product will help customer lower search cost and selection risk.
3 Service Value System And Marketing Strategy
3.1 Systematic structure of service value elements
Five value elements of service product are connected to each other, and will penetrate into each
other. Firstly, utility value is basis and core. The basis for existence of service product is to meet
customer’s requirement. Utility value is to meet customer’s demands directly. Secondly, experience
value, knowledge value and relation value are further development based on utility value, and they
could meet customer’s demands better. Thirdly, experience value, knowledge value and relation value
combine with each other. These three kinds of values are often combined. Action of service staff may
provide customer with knowledge value, and experience value and relation value as well. Fourthly,
brand value is the value at a higher level, which combines utility value, experience value, knowledge
value and relation value, and will finally win customer’s recognition of benefit and favor in feelings.
Brand value represents enterprise’s image and cultural tradition.
3.2 Position of service product based on value elements
Kotler quoted definition of orientation by two adverting managers Al Ries and Jack Trout,
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“Positioning is what you do to the mind of the prospect. That is, you position the product in the mind
of the prospect.” Positioning of service product is to confirm a suitable position for service product in
[8]
opinion of potential customers. We will describe and weigh position of service product in opinion of
potential customers in viewpoints of value elements.
First, analyze internal value components of series services provided by service products. Enterprises
could decompose service product, and a series of service elements will be gained, and values provided
to customers will present through analysis of service elements.
Second, confirm proportions of the five value elements in service product. One service product could
provide customer with various values, but importance of each value is different. Service enterprise could
take such five value elements as five coordinate axis, and draw service product value element analysis
figure.
Figure 1 Value element analysis figure
35%
Brand
Value
Relation
Value
Utility
Value
12%
12%
6%
35%
Knowledge
Value
Experience
Value
3.3 Confirm value marketing direction for service product
Value element analysis figure is not only useful for enterprise to analyze existing service products,
but also useful for enterprise to confirm developing trend of service product. Enterprise could confirm
developing direction of service product according to property and positioning of existing products,
combined with market developing trend and the target of enterprise.
Figure 2 A service product development direction comparison chart
Brand Value
Brand Value
30%
6%
10%
60%
14%
Utility Value
Relation Value
Relation Value
9%
Knowledge Value
15%
Utility Value
10%
Experience Value
6%
Knowledge Value
40%
Experience Value
For example, service product value element analysis figure, at left side of Fig.2, represents value
element composition of a body building club. After analysis, managers drew a new service product
value element analysis figure, which shows direction for enterprise development.
4 Cores Strategy of Various Value Elements Marketing
4.1 Utility value strategy
Core of enterprise’s utility value strategy is to meet customer’s requirements. Once service product
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could have the three characteristics—safety, reliability and availability, the service product could meet
customer’s demands for utility value.
4.2 Experience value strategy
To endow value to experience, experimental service must be object that people are willing to
consume. To realize such target, enterprise should prepare in two aspects: Firstly, what is customer’s
psychological appeal? To create unforgettable and pleasant experience for customer, service enterprise
must understand customer’s psychological appeal. Secondly, how to bring unforgettable and pleasant
experience to customer? (1) Design experience subject. “The first step of experience is to design a well
defined subject.” [9] (2) Strengthen sense. Thomas H. Davenport and John Beck raised that attention was
a kind of rare resource. [10]To make experience permanent memory of customer, enterprises should on
one hand, strengthen management over tangible facilities; on the other hand, strengthen personnel
management. (3) Eliminate negative elements. Enterprise should also try to reduce influences of
negative elements.
4.3 Knowledge Value Strategy
To spread knowledge value through service product, enterprise must have capacities in two aspects:
•
Ability of knowledge innovation. The so called knowledge innovation is the course of knowledge
production, application and value increasing. Only after mastering such ability of knowledge innovation,
enterprise could master information that others don’t know, and skills to solve special problems. To
improve knowledge innovation ability, enterprise could prepare from following aspects:(1)Collect
knowledge with Internet technology. (2)Collect knowledge with data mining technology. (3)Create
conditions for internal exchange and share of knowledge with Internet and enterprise LAN. (4)Set up
knowledge database to keep knowledge. (5)Design knowledge Figure. (6)Organize knowledge saloon,
to promote exchange of knowledge. (7)Set innovation failure tolerant mechanism, to provide staffs with
more loose innovation space.
•
Ability to spread knowledge. Enterprise is also faced by the problem of how to transfer knowledge
into service product, and transfer knowledge value to customer. Enterprise must recognize that, only
information and technology needed by customer could meet customer’s demands, and let customer feel
value. So the most important measure to spread knowledge is to customization.
4.4 Relation Value Strategy
The course that service enterprise provides customer with relation value is also the course service
enterprise learns and contacts with customer.
•
Learn Customer. The major way through which enterprise learns customer is to set up customer
database. By setting up customer database, service enterprise could identify customer, confirm level of
relation with customer, and conduct analysis of customer’s demands.
•
Contact with customer. The key of contact with customer is to master the “degree” of contract.
Suitable contract means that frequency and mode of service enterprise’s contract with customer could
meet customer’s demands, and bring pleasant relation value to customer. Frequency and mode of contact
are determined by enterprise’s orientation of relation with customer.
4.5 Brand Value Strategy
Core strategy of service enterprise’s brand building is to build brand association.
•
Try to show brand through various reasonable ways.
To build service brand, enterprise must try to show brand as much as possible, increase influences to
consumer, and consist consumer’s memory of brand. To show brand, enterprise must use brand elements
all-round, which include name of brand, “appearance” of service, and other brand elements.
•
Help customer to obtain happy consumption experience.
Customer experience is a determinative factor to set up brand of service product. Customer’s
consumption experience is decisive to his/her comment on brand value, so customer experience is a
keystone for building brand of service enterprise.
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•
Try to promote brand exchange.
Brand exchange consists of two parts, the first of which is exchange of opinions on brand among
customers, or in other words, public praise of brand, the second of which is internalization of brand, or
in other worlds, let spreading brand value to customer become a conscious concept of staffs.
5 Major Conclusions of the Paper
This paper analyzed value elements of service product from viewpoint of value elements, and
concluded as follows:
Firstly, value is material connotation and core composition of service product. This paper
considered that service value elements mainly include utility value, experience value, knowledge value,
relation value and brand value.
Secondly, relations between service value elements compose value system required by consumer,
basic relations of the value system are as follows: first, utility value is basis and core; second,
experience value, knowledge value and relation value are further development based on utility value;
third, experience value, knowledge value and relation value combine with each other; fourth, brand
value is value at a higher level.
Thirdly, based on analysis of service value elements and structure of the elements, we summarized
systematic strategy of service marketing. By drawing service product value element analysis Figure,
orient service product in viewpoint of value elements, confirm development tread of service product,
and formulate marketing strategy on basis of value elements and according to development trend of
service product.
References
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[2]
[3]
[4]
Valarie A. Zeithaml, Mary Jo Bitner, Services Marketing, McGraw-Hill, 1996, 5
Philip Kotler, Marketing Management(Tenth Edition), Tsinghua University Press, 2001, 428
Christian Gronroos, Service Management and Marketing, Lexington Books, Mass., 1990, 27
Cengiz Haksever, Barry Render, Roberta S. Russell, Robert G. Murdick, Service Management and
Operations, China Renmin University Press, 2000, 104 (in Chinese)
[5] B.Joseph Pine , James H.Gilmore , The Experience Economy, China Machine Press, 2005,12 (in
Chinese)
[6] Richard Noman, Service Managemen(ThirdEdition), China Renmin University Press, 2006, 104 (in
Chinese)
[7] Philip Kotler, Marketing Management(Tenth Edition), Tsinghua University Press, 2001, 50
[8] Philip Kotler, Marketing Management(Tenth Edition), Tsinghua University Press, 2001, 404
[9] B.Joseph Pine , James H.Gilmore , The Experience Economy, China Machine Press, 2005, 54-58
(in Chinese)
[10] Thomas H. Davenport, John Baker, Attention Economy, China Citic Press, 2004, 1-19 (in Chinese)
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